Bookkeeping in Excel

What is Bookkeeping in Excel?

Bookkeeping in excel means recording of day to day financial transactions of an entity such as purchase, sales, payments, receipts & expenses in an excel template. For a recording of transactions into excel, first need is to setup/customize excel as per requirement and then record day to day transaction in this template and save it in your own computer.

Single Entry Bookkeeping in Excel

In a Single entry system, only one side of the transaction will be recorded and the effect of these transactions will go to only one place rather than the double-entry accounting system where every transaction will be recorded by debit and credit and these will affect two accounts.

In single entry system transactions will be recorded by keeping in mind the objective and result of the transactions. In single-entry bookkeeping, the main focus will be given on cash receipts and cash payments rather than a recording of each expense and income or assets and liabilities.

How to Create Bookkeeping in Excel

Step #1: Prepare an excel template for a recording transaction according to the requirement while preparing an entity that can take the help of accounting professionals.

Step #2:Prepare a chart of accounts for recording and categorizing the transactions according to the nature of business. Generally, a chart of accounts is divided into three categories which are:

Cost of Goods Sold: Money which is spent on creating the finished goods.

Below is the sample chart of Accounts:

Step #3: Prepare income statements with the help of a chart of accounts to arrive at the gross profit and net profit for over the period. For monthly income statement 12 income statement sheets will be prepared and after that one annual income statement sheet will be prepared by merging all 12 income statement sheets. The flow of income statement will go as below:

Step #4: Prepare one excel sheet where all the invoice no. will be recorded so that it can be the track which invoice was paid or which invoices are pending for payment.

Step #5: Prepare cash flow statements for ascertaining the cash position of the entity.

Step #6: After preparing all the above excel sheet to save the file to a secure location by giving the proper name to the folder. We can protect this file by password also.

Example of Bookkeeping in Excel

Below is the cash book for the period of Apr’18 to Jun’18 maintained in the excel spreadsheet, where cash inflow and outflow have been recorded by using single-entry bookkeeping.

As on 01.04.2018 Opening balance of cash and bank is $1000 after adding and deducting income and expenses over the period we will arrive closing balance of $2564.

Advantages

The following are some advantages:

Bookkeeping in an excel template does not require any special accounting skill therefore it is easy to maintain record transactions.

It is less expensive because the excel spreadsheet is available on every computer/laptop therefore it is not required to purchase any accounting software.

Excel has various functions that help in the easy recording of transactions like addition, multiplication, VLOOKUP, pivot table, macros.

Excel helps in the preparation of various graphical presentations like Charts, bar, Pie or many others.

It can be accessed by multiple users in an office by sharing the excel sheet in an only readable mode in which the only one can change the data in the excel sheet and others can only view the data.

Disadvantages

Below are the disadvantages:

In excel, bookkeeping users can prepare the data as per requirement and he may be biased while preparing and presenting data to the management.

It is necessary to enter the correct formula because in excel formula will be entered manually and if there is any mistake in a formula then the end result will change and this will affect decision making.

Excel bookkeeping is less secure than data maintenance in accounting software and it can be easily hacked by hackers and in an organization also anyone can access the data.

It is not useful and time consuming where a large amount of data to be entered in excel.

In excel, it is not possible to automatically import data from bank software or other software like other accounting software which allow to automatically import data from other software.

Conclusion

Bookkeeping in excel sheet is useful for those organizations which are in initial phase of business and don’t want to increase their expenses by recruiting skilled manpower and purchasing of accounting software and it is easy to maintain accounting transaction into excel as compare to recording of transaction in accounting software but at the same time it is less secure and not useful for a large number of transactions and chances of error are very high.

Recommended Articles

This has been a guide to what is bookkeeping in excel. Here we discuss an example and how to create bookkeeping in an excel template along with advantages and disadvantages. You can learn more about accounting and financing from the following articles –